Vets out to make big money thanks to pet insurance

I came across a very interesting article in The Times yesterday: “Vets cash in on Britain’s love affair with its pet”. According to a recent study from CCH, a rather unknown accountancy firm, vets are the most profitable small business category in the UK.

Vets achieve an impressive return on capital employed of 37%, on average. This means that for each £1 spent on capital, vets cash in £1.37. How do they manage to be so successful is simple: the rise of pet insurance has opened the door to more complex and more expensive treatments to be carried, including alternative therapies now increasingly used in a complementary capacity. Vets have more options to choose from when treating an injured pet and can opt for the best possible care without being constrained on costs or the owner’s budget.

Therefore, pet insurance providers are concerned that vets go over the top when it comes to treat an insured animal: vets know the insurance will pay for the claim, so why not charging a little bit extra and make unnecessary tests? After all, the pet owner won’t see the difference in terms of cost, so it makes very little difference to them. As a result, an insured pet also tends to visit the vet more frequently and owners of insured animals generally spend 51% more on core vet bills than those of uninsured animals (source: www.theveterinarian.com.au, 2008)

With pet insurance premiums rocketing, vets are likely to get more business in: since pet owners spend quite a big amount insuring their pet, they’ll be more incline to use their cover whenever its possible.

The latest report from Datamonitor states that the pet insurance market was worth £380m in 2006 and is expected to grow to nearly £600m by 2011. Vets should be pretty happy with these figures and its easy to see why.

Top 20 UK businesses by Return On Capital Employed (ROCE) in pecentage

Position, Industry Sector, Average ROCE

1 Vets 37.0%

2 Plasterers 28.3%

3 Greengrocers 27.5%

4 Butchers 20.3%

5 Joiners 20.3%

6 Financial advisers 19.6%

7 Chemists 19.6%

8 Roofers 18.8%

9 Specialist food retailers 18.6%

10 Insulation firms 18.6%

11 Flooring firms 18.3%

12 Plumbers 17.5%

13 Lawyers 17%

14 Builders 16.9%

15 Hairdressers 16.7%

16 Electricians 16.3%

17 Estate agents 16.0%

18 Supermarkets 15.4%

19 Decorators 15.4%

20 Cleaners 15.2%